The Affiliate Marketing Business Model Explained
Affiliate marketing is one of the foundational business models that almost everyone who has made money online has some experience with. It can be incredibly lucrative, but provides its own set of benefits and flaws, as every business model does.
At its basic level, affiliate marketing is simply where you sign up with a company or a network (a network is just a company that houses many offers from different businesses) to sell their products or services. You get paid typically every time someone either buys something or executes the desired action.
You are paid a commission every time you succeed, and this money is more or less from the marketing budget of the company who is offering the affiliate program.
Some affiliate programs will pay you long after you make the sale as well-known as rebills. These products can be harder to sell, but with the right angle, they can be worth it in the value they offer with their monthly paychecks.
While there are far too many affiliate networks out there to list them all, here are a few common ones that many people use:
If you want an explanation of how affiliate marketing works and a proactive plan that can help you make money in this business model, then check out our Youtube video below:
Affiliate Website Examples
It is often hard to visualize what affiliate websites would look like, so I gathered a few here for you to gain inspiration from when you go about designing or redesigning your own affiliate site.
MSE is a great example of an affiliate site that has become an authority site. It is not offering thin content and barely veiled “reviews” that are trying to sell something. Instead they are offering actual actionable advice and maintaining a strong code of ethics in the often dirty personal finance niche. They make their affiliate commissions by linking out in their posts and pages to affiliate products they have agreements with.
Dating Advice is another affiliate site that makes money by promoting their affiliate links to different dating apps and websites (like Match and eHarmony). The dating niche is an incredibly profitable niche for internet marketers of all stripes. They often attracts people who want to make a quick buck, unfortunately, selling gimmicky info products or shady memberships.
This website takes a different tack on that, and offers good advice while keeping its ethics alive by promoting quality offers that aren’t out to scam those who buy.
The design is also a great design, one that you might be inspired by when you go about creating your own affiliate site.
The Pros of an Affiliate Marketing Model
There are many benefits of an affiliate marketing model. For one, it is a fairly passive model if you go the SEO route with your website. Unlike Amazon affiliates, there is a bit more of link management to do, which we will get into below.
Affiliate marketing can be incredibly lucrative with just one website and a bit of content. This is different than the Amazon affiliate model, which often takes several sites to create a great income with their sliding tier of commissions. In addition, there is an incredible variety of products to promote and sell. Almost every business has an affiliate program of some kind, you just scroll down to the bottom of their site and their affiliate program will be hyperlinked right next to their Contact Us link.
While every affiliate program is different, you are less likely to be hit by a ban hammer in the affiliate space than in the Adsense space. In general, affiliate networks can be a bit more lenient with their terms of services. You also have the benefit that many networks are hosting the same offers, so if one does ban you, you can usually replace that income with the new network offer.
Or you can do what many affiliates do and go direct to the company.
The vast majority of affiliate offers come direct from the company rather than affiliate networks.
Many affiliate programs can be found with relative ease. For example, if you had a website where your target audience was interested in products found on Gilt, you can search for “gilt affiliate program” to determine if they offer a program and what the terms are.
In addition to all of this, you don’t really have a store to look after. You have zero products to ship or be held responsible for. You are literally just the marketing arm, unlike the ecommerce business model where you are sourcing the products that you are selling and dealing with the customer service portions of the business, along with logistics.
With affiliate marketing, you have next-to-zero need to do any kind of customer service. That is taken care of by the company that created the offer in the first place.
Unlike an Amazon affiliate business model, affiliate marketing tends to be more lucrative in terms of the profit margins you can earn per sale. This makes paid advertising easily profitable, so it can be a valid choice to grow your website. Many affiliate marketers focus almost 100% on paid traffic. They create a landing page, a sales letter, and off they go with Facebook ads or Google Adword campaigns.
While you should not invest in paid traffic without knowing a little bit about it first, having this opportunity can really boost your sales quickly, and almost overnight, versus having to wait around for rankings like you do with SEO.
Finally, one of the major benefits of affiliate marketing is that you can get paid a commission, even if you don’t sell a single thing.
This is usually called Cost-Per-Action or CPA offers. CPA offers typically require the visitor to take some kind of action, and if that visitor takes that action, then the affiliate network pays you. Often this action is submitting an email to become an email lead for a company, or filling out an entire form, whether a lead form or a survey data collection form. While CPAs pay lower than offers that pay you per sale, they often convert at a much higher rate, since there is no money that the visitor has to put down for the conversion to be complete. This higher conversion can often more than make up for the lower profits earned on an individual basis.
The Cons of an Affiliate Marketing Model
Affiliate marketing done right can be ethical, extremely helpful to the end consumer, and an overall good thing for both the company that created the offer and the affiliate promoting it (and, of course, the customer). Even still, there are drawbacks to the business model you should know about.
In fact, affiliate marketing often has a reputation for being sleazy, cheesy, or scammy in nature. This is something that affects the industry, mainly because of the low barrier to entry. Anyone can become an affiliate marketer, you just need to sign up for an offer and start promoting.
As you might imagine, this attracts a lot of unsavory characters to the field.
Because of this low barrier, affiliate marketing can also be incredibly competitive. After all, you are all selling the exact same product or service using the exact same sales letter and checkout process. If you don’t find a way to differentiate yourself, it is unlikely you are going to be able to succeed.
First thing to pay attention to, once you decide to go ahead with “good” affiliate marketing, is the affiliate offers themselves. Affiliate offers can come and go. I mentioned above that there is more link management involved with affiliate marketing versus Amazon affiliate sites because of this. If your affiliate link is pointing towards an offer that an affiliate network is no longer offering, you’re missing out on all the commissions you could be earning.
Secondly, while an offer might not disappear, you might be earning far less than you should be, because that offer suddenly has a max cap. In other words, the company that set up the offer only wants to spend a certain amount to get a certain number of customers or leads. The network limits how many paid leads/sales count towards the affiliate marketer in this case. You might end up giving away free leads or sales by accident in this case, so it is something to watch out for.
Finally, you don’t control the entire process.
That ultimately means there is less growth ability. For example you can’t just go in and change a checkout process to split test which one will perform better. You only really control the front or what is also known as “top of” marketing funnel. This makes your options more limited than if you were running a full blown business where you sourced the product yourself and controlled the logistics and check out processes.
The Importance of an Affiliate Marketing Business Plan
An affiliate marketing business plan can not only help you stand out from the noise of competitors but can also provide you with clarity in your daily, weekly, and monthly tasks.
Having a clearly laid out plan can save you time and, just as importantly, help you to stay consistent in your business-building tasks.
Along the way, you may find the need to make adjustments according to your research, but it is far better to have a plan to get you started than to feel as if you’re constantly playing catch-up each week to figure out what to do next.
Some components of a business plan for affiliate marketing include clearly defining your goals as well as what metrics you will use to measure progress, articulating your target audience, and deciding on your method of promotion.
What Buyers Need to Know
To join other entrepreneurs who are buying vetted and profitable affiliate sites, register for a free account on our marketplace.
Where you buy a site from is important, but before you buy an affiliate site from anywhere, you should know a few things in advance.
First, find out all the affiliate networks being used on the website and figure out which other networks have the same offers, so you can use these as backups. You may need to move if the offer with the current network goes down or starts capping you. If at all possible, ask yourself if the offers on this site are evergreen or a flash in the pan kind of offer. If you are buying a website, you will likely want to make sure the offers are going to be sticking around for the long term versus only a couple of months after you purchased the website.
If the website isn’t an authority in its niche, ask yourself if it is setup to be one. You should always have this in mind, but especially with affiliate sites. Since affiliate sites have such a low barrier to entry, by buying an authority site, you are significantly putting yourself ahead of your competition who will be entering the game without an authority site. This will help you keep market share and dominate the niche.
Before purchasing the site, ask the seller if they have any special offers with their affiliate managers/networks. If they do, you will want to make sure that you are going to be getting the exact same special deals when you take over the website. These special deals could be something as simple as allowing extra people into a capped offer, or even as lucrative as providing a bump in pay percentage.
What Sellers Need to Know
Exit planning is your best chance at maximizing how much your affiliate site is worth. If you want someone from our team to create an exit plan for your business, schedule a free 30-minute call here.
More generally speaking, you know by now the low barrier to entry that affiliate marketing has. So the more an authority your site becomes, the higher chance you have of selling your site for a much larger multiple.
Always be thinking about how you can make your business more defensible and more difficult to copy.
You should also have tracking setup for every affiliate link of yours. You can do this with something like Voluum that can track the sales you are getting and where those sales are coming from. This will be useful data for an analytical buyer who wants to split test the website, not to mention it will allow you to split test the site and possibly push your monthly net profit up which will also increase your site’s listing multiple price.
If you have any kind of special deals with your affiliate manager, make sure that you can pass these along. If you can’t, then you need to take that portion out of the business and sell as if you weren’t getting those extra benefits. One of the best ways to transfer these kind of special perks is by also making sure that your affiliate manager becomes the manager for the new buyer as well when they sign up for that network. Most affiliate managers work on a commission basis from the sales that their affiliates are doing, so they will likely be more than happy to do this since your website is already a proven profit maker for them.
Finally, email every network you are associated with for this website to inform them that you are selling your site and that you want to make sure that the new owner will be approved for that affiliate network. This is an important, if not obvious, step to follow. If a network denies the new buyer, that is going to lead to a lot of trouble when it comes to them taking full ownership over the site.
What Buyer Persona Best Fits the Affiliate Marketing Business Model?
Every business model attracts a different set of people. The interesting thing about affiliate marketing is that it can really attract a lot of different personas versus other business models.
It is perhaps one of the most diverse ways of making money online in that there are just so many different affiliate programs out there in almost every niche imaginable.
If an affiliate site is using SEO as its primary traffic getting method, then affiliate sites can become very appealing to a Lifestyle Larry. Outside of doing some link management and making sure the offers are still valid, there isn’t a whole lot of work to be done unless the new owner wishes to grow the site. If they are content with living off the residual income though, there isn’t a lot of day to day management that they are going to have to do.
Having a website selling affiliate products from programs outside of Amazon can make a lot of sense for a Portfolio Paul. It is just another route of diversification and, like Amazon or Adsense, affiliate sites do not take up a lot of time to run.
A DIY Dave might absolutely love buying affiliate sites and running them. Since affiliate programs usually have higher margins than Amazon affiliate products, a DIY Dave could seriously dive deep into paid traffic and create entire sales funnels around the affiliate program or the niche that the site operates within.
If they own a website or a business in a similar niche, then owning a large affiliate site could be a great complementary way to make more money while still dominating the main niche that they are focusing on. Since affiliate sites do not take a lot of time to manage when not in growth mode, a Strategic Sally could buy this site and just use it to boost her personal brand or the business that she is currently growing with ease.
There are many ways to grow an affiliate site, so it makes sense that a Flipper Fred would want to purchase one of these websites and grow it using various growth strategies that we will mention below.
There are many ways to grow an affiliate site to produce even more profit than it currently is, but this is by no means an exhaustive list. It should leave you with some good ideas, though, on where you can take your site and how you can scale it up even further.
Ask for a Raise
Probably the simplest route, if you have an affiliate site that is already making sales, then you should hit up your affiliate manager with a pay bump request. Many affiliate marketers do this, and then run incredibly successful paid campaigns, with this pay bump as their only real profit margin. Because they have this extra bit of money to work with, they are often given an advantage over other affiliates who did not get a pay bump.
Find More Keywords
Use a tool like Longtail Pro to find more keywords that you can target with your website. The more content your website has, the faster it will become an authority and the more authoritative it is, the easier it will be for the search engines to pick up your content and start sending you more free traffic.
Create a Paid Ads Sales Funnel
For more expert internet marketers, craft a sales funnel around your affiliate products you are promoting. This could be done via a 7-day bootcamp that you give away to your email list, or perhaps a cheat sheet that contains affiliate links. By creating a sales funnel and building an email list though with paid ads, you can seriously scale your business to the moon very quickly once you have a profitable campaign underway.
Find the Offers with the Best EPCs
EPC stands for Earnings Per Click. It is the estimated amount of money a marketer can expect to earn from a 100 clicks to their affiliate offer. This is a great piece of knowledge. You should be on the lookout for affiliate offers with the best EPCs. In addition to finding new offers, look at other affiliate networks that are doing the same offers that your website is doing.
Is the EPC higher with that network than your current network you are using? If so, it might be worth your while to test out to see which performs the best.
Resources to Learn More
There are thousands of blogs on the internet that talk about affiliate marketing. Though not very many of them actually have successful experiences with affiliate marketing. Remember what I said about that low barrier to entry? Below are two good guides that can help you in this crazy world.
This is an authority style blog that talks about both the positives and the negatives of the affiliate marketing world. Unlike many affiliate marketers, this blogger focuses on content marketing as his main push for his affiliate sites.
Charles is a huge internet marketer and a big promoter of the affiliate marketing industry. His blog is one of the best there is out there on the subject of affiliate marketing and how to turn all those EPCs into a viable career, like he did.
Buying and Selling Affiliate Sites
Did this article excite you about the possibilities of affiliate marketing in your own business? If so, maybe it is time to head over to our marketplace and check out our current affiliate site listings.
Or maybe you already have an affiliate site that is producing a solid profit month after month? In that case, sell your website today for a big payday.